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The S&P 500 is basically back to where it started the year following the rally over the past few weeks, as you can see in the chart below.

I'm also seeing that the short-term oscillators have moved into those overbought zones that, for the last few years, have produced a temporary topping action, which you can see in the charts below.

Also, I have seen improvement in investor psychology, but not nearly enough to convince me that the eventual low-risk buying juncture is here, but we'll just have to wait and see how this plays out from here.

As you can see in the chart below, the "market" reached a very oversold point recently (in the short-term, as measured by the McClellan Oscillator - blue line), which made a relief rally very likely. That has now moved the McClellan Oscillator back into neutral territory.

In the next chart, you can see the very bullish "dumb money" Rydex traders have quickly reversed directions and are too now back in neutral territory.

And lastly, as we look at those investors that have traditionally been very astute, we see our Gambill Insider Ratio has also moved from being very bearish as those insiders were selling their stocks to a less bearish position as they've started to warm up with a little buying.

I like the improvement; however, it's not yet enough to make me doubt my short-term (3-6 month) caution.

Out of the blue in these last few weeks, we started to hear some negative news from China. Remember, this has been an ongoing concern from the "chicken littles" for the last 10 years, but they were so wrong, or so early, that they have quietened down in the last few years. Last week, however, we got these news clips.

Let me start off with a chart from Ed Yardeni's blog. (I hope you are taking advantage of this excellent site that is one of my favorites.)

In Yardeni's chart above, you can see that recent drop in China's M-PMI released last week.

Also, in a recent report, I mentioned how the Baltic Dry Freight Index had improved, which often tells of an improvement in the Chinese economy.

That did occur...temporarily; however, in the last week, those gains have dissipated, adding to the concerns of the Chinese problems.

Today, let's take a quick look at a couple of examples of Psychology that tells us again to be a "little" careful. We've given you multiple examples in the last few weeks, but here are a few more.

In the chart above, you can see that in many cases, the greatest number of stocks making new 52-week highs reaches their highest number while the current rallies are still relatively early in their maturity. Then, we start getting fewer and fewer of the stocks participating.

The next chart takes a look at the McClellan and 21-Day Oscillators.

The 21-day oscillator (orange line above) is somewhat in that same vein as the net hew highs indicator, showing the very "overbought" characters relatively early, and then as the momentum of the bullish advance deteriorates, the market indices themselves may continue to advance (and the 21-Day Oscillator improves), but internally, the stock market correction continues.

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